SEC Staff Declares Performance History Is Not Factual

The Securities and Exchange Commission staff recently issued a series of additional Compliance and Disclosure Interpretations with respect to what might constitute a “general solicitation” under Regulation D.  These interpretations illustrate the logical contortions that must be endured when trying to regulate speech.  After admitting that an issuer may disseminate factual information about itself, the

Why The SEC’s Pre-Existing Relationship Test Is The Mirror Image of California’s

One significant condition to California’s limited offering exemption is that all purchasers have a “pre-existing relationship”: All purchasers either have a preexisting personal or business relationship with the offeror or any of its partners, officers, directors or controlling persons, or managers (as appointed or elected by the members) if the offeror is a limited liability

Bad Actor Disqualification And Just How Do You Know Whether A Violation is Scienter-Based?

In a recently issued Compliance & Disclosure Interpretation (Question #260.21), the SEC staff unequivocally stated that “bad actor” disqualification under Rule 506(d)(1)(v) is “triggered only by orders to cease and desist from violations of scienter-based provisions of the federal securities laws, including scienter-based rules.”  In Kid, Did You Ever Go To Court?, I questioned whether the list of

“Kid, Did You Ever Go To Court?”

In a recently issued Compliance & Disclosure Interpretation (Question #260.21), the SEC staff unequivocally stated that disqualification under Rule 506(d)(1)(v) is “triggered only by orders to cease and desist from violations of scienter-based provisions of the federal securities laws, including scienter-based rules.”  Quick, list all of the scienter-based federal securities laws and rules.  I can’t.  If there’s

New Rule 506 C&DI’s Require Some Explaining

Nancy Wojtas, the head of the public companies group at Cooley LLP, alerted me to the fact that the SEC staff yesterday issued 14 new Compliance & Disclosure Interpretations (C&DIs) relating to Rule 506 under Regulation D.  Here’s my take on three of them. Question 260.15 Question: If a placement agent or one of its covered control persons,

Just Who Is A Promoter And Why You May Want To Know

The California General Corporation Law uses, but does not define, the term “promoter”.  For example, a promoter can be criminally prosecuted.  Corporations Code Section 2251 provides that any promoter “who knowingly and willfully issues or consents to the issuance of certificates for certificated securities, or initial transaction statements or written statements for uncertificated securities, in

Questions About Third-Party Confirmations Of Accredited Investor Status

Countless memoranda and alerts have been issued about the SEC’s adoption of rule amendments eliminating the prohibition against general solicitation and general advertising in Rule 506 and Rule 144A offerings.  Congress ordered the SEC to adopt these amendments as part of the Jumpstart Our Business Startups Act, or JOBS Act.   Issuers that wish to engage in general solicitation take “reasonable

Should There Be “Bad Actor” Risk Factor?

I’ve devoted several recent posts to the Securities and Exchange Commission’s new “bad actor” rule because it is awash with a sea of troubles for issuers, both private and publicly traded.    The rule prevents issuers from relying on Rule 506 if they are or have been subject to any of a long list of

SEC’s Bad Actor Rules Roil Opinion Practice

The SEC’s bad actor rules are causing a great deal of consternation amongst lawyers who are being asked to give opinions that the offer and sale of securities do not require registration under the Securities Act of 1933.  Historically, these opinions were usually based (albeit not always explicitly) on the non-exclusive safe harbor of Rule 506.  The addition of bad

Will Issuers Add Rule 506(d) Bad Acts To The Definition Of “Cause”?

The SEC’s new bad actor rule, Rule 506(d), may cause some issuers to consider expanding the definition of “cause” in their employment agreements with executive officers. Because executive employment agreements typically reduce severance payments significantly in the case of “for cause” terminations, the definition of “cause” is often hotly negotiated. While “cause” definitions often include